everybody good luck in powerball and i'm sorry because the "mad money" powerball has been taken and we're going to win. we're going to be very diversified when we put our $500 million together. i'm jim cramer, see you tomorrow! good evening. >>. i'm larry kudlow. this is "the kudlow report." if you say the right thing about the fiscal cliff deal, boy, will these markets turn on a dime and i would like to be optimistic. neither taxes nor spending nor entitlements were solved today. in fact, president obama never even mentioned the word spending. the one thing we do know, your taxes are going up from an obama care tax attack. no matter what happens on the fiscal cliff. and is another bailout nation on

the way? student loans up to $1 trillion, huge delinquency rates, default rates going sky high, no credit standards and sky high tuition. sound likes a real bad story to me. ceos have just wrapped up their meeting with president obama about the fiscal cliff and minutes ago john harwood landed a big fish. goldman sachs ceo lloyd blank finefein. >> the highlight of the meeting was the intensity from which the white house emphasized that marge al rates as a matter of math and politics have to go up somewhat, if not all the way to 31.6 had to go up and as p he said as a necessary ingredient of a deal, he would support such

a rate. >> the president said we would pursue our own interests. i'm not -- i'm certainly not insisting, i don't even desire higher rates. i think there lab drag if revenue goes up and rates go up. but i think there will also be a drag on the american economy if our budget deficit widens out forever, if we're irresponsible and governor doesn't work. left with those four choices, think think -- on the flip side, did republicans ask you to spend any nuts -- i think at this point both sides have acknowledged that there's going to be revenue concessions and entertainment concessions. in fact, if you listen to, it again, i'm not a master of the political art here, i'm in

washington but i would say if you had these points of views in a business context, as close as they are, i would say a deal would be in reach. >> you see some fundamental level of optimism from lloyd blankfine but a long way to go with the combination of prief pressure and public pressure, like the president is going to exert before we actually go to the flight of fired. i asked the treasury secretary should the president return to wall street. he it must be someone who understands markets, marry. >> me have 33 days to -- head of

all pi he told john harwood. marge i will hates have to go up somewhat. he said that's going to put a drag on the economy but we have to do something about the deficit. i don't really understand reasonings. i think he needs to go back to economic then i would argue the deficit gets worse because the revenues don't come in because the unemployment rate goes up. >> you're absolutely right. france instituted a 75% marginal tax great early last night grease going we've got to make sure we're getting gross right if we want to face the deficit. you go pro row tax reform you broaden out debate like an

82-year-o 82-year-old. >> you think, however, reading from your notes and looking at the stock market, particularly retail stocks, you believe that taxes are going up. you believe that's the stock market message, it meal why then. the blebs saying it when you look at the retailing names, the market tells you they think all the middle class market will get extended. you see order? core it's not just this consumption that's going to

you're going to gets will live dent, small cap stocks are underperforming. we're going to have a hard cap gains tax, a high are def inter. a lot of people but in terms of the way you look at the stock market is the smorkt saying definitely higher cap gains, higher dividends. >> there's no doubt about it. when you look at capital gains, you see the small saps are selling off. semiconductors have been sell and hard, asset managers who have trading. they areily. clr, rare ethat signal health

insurance pab thein the the difficult dent tax run, the fwhrch let's hope the odds of snachlt sflfrmt sfwrchl and kevin mccullough joins me on set, nationally syndicated tax show host and columnist for

townhall.com. you're much smarter than obama than i am. he's saying he wants the senate democratic bill, which will raise the top tax rates and therefore is rejecting john boehner's conciliatory idea of limiting tax deductions. is that the way it is? boehner just got dissed today? >> i think the president is reminding republicans that they lost and that after a vigorous come pain with many of the same ideas that the republicans are trying to defend now, that's goinged not -- if he's serious, he'll willing to make a deal but he's not willing to make a bad deal. on that the president is very firm. >> i wonder if he doesn't want high tax rates and caps on deductions so he can have more revenue to spend. the reason i have that logic is once again today at this

campaign rally, or whatever today was, he didn't mention the word spending cut, never once. >> it's not in his vocabulary. one thing we know about president obama is he campaigns to the middle but he kind of straights from the left and what i fully anticipate is there's a reason why dick durbin, who was his senate partner from oil know, is saying which they went to 100% tax rate on million favors and people making above 250,000, it still isn't going to close the gap that exists. lfr maybe the the pie larger. >> let's be very clear, though, the president has already signed into law more cuts than were in the simpson-bowles proposal,

he's proposed additional cuts in the 2013 budget he's proposed. to say he hasn't put cuts on the table is completely disingeneralsous. >> karen is making president obama out to be a tight fisted spending cutter. you followed the fiscal beat? >> do you regard president obama as a tight-fisted spending cutter? >> it's somewhere in between. he did sign a cap that would save a trillion dollars over the next would you mean of years. but thens other side of it is that we need about $4.9 trillion of savings over the next year to stabilize grashio, or cutting spending to medicare crieders. you actually do need to take on and storm reforming or we're

going to be facing a down grade of all three rate being agencies. >> in brief, this stuff about -- they call it providers. providers are patients, providers congress -- you think congratulations and republican are going to take out from -- >> i think it's going to be a provider but i generally don't think it's like it. >> how can john boehner and the republican, preserving some modicum of preegt market, limited government that lacks even small entertainment cuts and plaques spending cut.

the see kwenter, that's gone, right? what is going nobody its place. >> supposedly. >> and mr. bainor has made it very clor that it sounded to me like mr. john boehner despites a's in they were to find ways to get to that number. the problem is as long as the pie stays the size that it, is you're not talking about significant changes that are going to have maybe ten-year changes long time for this kmirnt economy, when you begin to what the impact of this is 20, 30, 45 years a road. you're talking about the.

>> my fear is that they've already given up on that. >> no, hold the line! i can hear you're getting excited about this, which pleases me to no end. i jufrs wanted to ask you why should john blaineor play ball if the president won't play ball back. in h and not sure sure about that and i'm not pessimistic. i heard the top tax rates are going to go up. all of come from. >> here's the problem, boehner is trying for sm reason he's trying to adjudicate the problem we were having during the election. they lost. a majority of the american people, more than the number of people who actually voted for

the president don't great with that approach. they great with the president's himself here in not recognizing that he does not have the leverage he believes he had. >> he grew his from boehner earthquake. >> no, he didn't. fuel will youly lost sea. now, litz listen to, this fiscal cliff or no fiscal cliff, your taxes will probably go up anyway. it's all because of obama. >> the economy, slam investors and triple capitalism. say no to nationalized health care system, no to blanket tax increases and that means let low.

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welcome back to "the kudlow report." americans for tax reform tell us that on january 1st, 2013

americans will get smacked with a staggering $268 billion tax hike, all of that thanks to obama care. happy new year indeed. joining us to report on this, news editor townhall.com. lickity split. let's go through this from your report. i want to rank them by numbers. the biggest one here, $123 billion is a 3 .8% tur tax on all manner of investment. how is that going to help the economy? >> it won't help the economy. they're going to put this new 3.8% sur fax on to investors to pay for obama care. as you mentioned, it cost more than $100 billion. something to keep in mind here is the total tax hike cost for obama care is $500 billion. americans will see more than half of that take place on january 1st.

>> that's on top of whatever they decide to do on this fiscal cliff business. katie, the next biggest one, $87 billion is an increase in the payroll tax. .9%, 2.9 to 3.8%, small business busy and self-employed. how does that promote growth. they're going to be hiring less and there are going to be fewer employees. >> don't they talk about this? why don't they do the add-ones that you're doing on the obama care taxes? >> i'm actually not sure about this. i'm pretty confused about why the romney campaign didn't hit the obama care tax argument harder on the campaign trail

because the supreme court ruled it a tax for good reason. it had gone through the numbers here on your show. this hit small businesses and in return hits the middle class, the very people that these small businesses employ, the people who will get hid the hardest, even though making $200,000 per year are the ones employing the middle class that president obama keep propping up to get his agenda passed. >> now we have this $20 million medical device tax. this has been around. i believe you write this will really crush medical innovation in the united states. >> right. i think this is one of the more severe tax thaeds we're going to see. essentially with this medical device tax, they're tacking on more costs to life saving devices such as mechanical hearts. it does the same thing as a doctor shortage. the students that go into these programs, myio medical

engineering, are not going to see a return on their investment because it's going to be a too expensive for companies to keep as many employees around, which in the long run means companies are going to be producing less effective and less efficient medical devices. >> another one, a nasty one, this one is only worth $13 billion but gee whiz, a cap on special needs kids. can you talk about that? that's incredible. >> the current law states and this will change on january 1st that -- it changed when obama care passed. it used to have a flex spending account that you can pay for special needs tuition with it. that used to be an unlimited amount for special needs families. now the federal government has put a cap of $2,500 on what's called your flexibility spending account. anything above $2,500 will be

taxed and the rest will be taxed. they are going to be playing $10,000, $12,000 more per year taxable rate to get their kids per school. >> and they're always talking about how the republicans want to destroy the study for autism. but here it is black and white in the obama. we appreciate it. it's great to see you. >> thanks for having me. >> now to the lottery frenzy. there's already a winner in this game. the government. not good. we're going to explain when "the kudlow report" comes right back. if everything on the fiscal side caves, what incentive is there for tax reform in 20 13? >> ups believes congress does need to move very quickly to get this done.

>> there are going to be many moments when it seems like there's a deal and then there are people who fight the deal, which is why we have been featuring the notion of rising above. >> all sides could lose if an agreement isn't arrived upon.

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we're more than 78,000 people looking out for more than 70 million americans. that's health in numbers. unitedhealthcare. the new movie "lincoln" is a smash hit at the box office and the critics, including me, loved it. here as the question -- is there something for our current president to learn from the theme of the movie? if anyone knows the answer to that question, it's lincoln expert doris kearns goodwin and she'll join us in the next half hour. >> now, there's lotto fever all over the country. jay joins us from dallas with the details. >> you can see there are people flocking in here. they have been in waves all day. it has been very business here at police called fuel city, iconic here in dallas, great

tacos here, you can buy gas obviously by the name but the big ticket has been the big ticket for the powerball. right now tickets selling at about $130,000 tickets per minute nationwide. over 1 billion have been sold. the states get $1 out of every two tickets sold and most use for programs for education the federal government will tax the winnings at about a quarter. so they'll make a lot of money out of this. unfortunately in the interest of full disclosure, larry, i think think the winning tickets have about been bought here in dallas. right now i hate to tell you, i think i've got them. >> fess up, jay, how many did you buy? full disclosure? transparency. >> only five. but i may be here a little longer. >> if you win, you're not going to retire, are you?

>> i'd never retire. a lot of people say this already, i'd probably be pretty tough to work with if i do win. >> now, let's break down the numbers on this powerball jackpot. they're still selling tickets at blistering rate, 130,000 per minute. let's assume the final prize tonight will be ds 600 million. that's just an assumption. if up choose the cash option, if you win and you choose the cash option, we'll calculate you'll keep $393 million. if you live in new york city, federal, state and city taxes will take you down to $223 million. so you keep 57%, you give uncle sam 43%, you still have the $223 million bucks. it's a pretty good deal. but let me just ask you, do any of us know really what the government does with that money, especially the city government? and does it really go for good education purposes, as they say? and is there any bureaucratic

skimming off the top? the winner loves this game, always does, but how about the rest of you? please think about it. there may be better ways to invest your money. >> moving right along, did the president really resolve key questions on tax rates and spending and entitlements at his campaign rally today? i never heard the word spending? so how close to a deal are we really? i'd like to be optimistic but i'll warn you, caveat emtore. we'll get into that next. [ female announcer ] if you care for someone with mild to moderate alzheimer's, you'll also care about our new offer. you get access to nurses who can help with your questions. and your loved one can get exelon patch free for 30 days. if the doctor feels it's right for them. it cannot change how the disease progresses.

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. welcome back to "the kudlow report." >> there are important lessons in the historical movie "lincoln." and taxpayers on the hook as student loan delinquencies explode. who is going to pick up the pieces here? president obama ramped up pressure to raise taxes on the wealthy. i didn't hear anything about spending cuts, entitlement reform or any sign of common ground plan to avert the coming

tax and fiscal cliff. joining us to talk about this, we're going to get a gop response, senate republican conference chairman john thune of south documeakota. welcome back to the show. "the washington post" runs an editorial today saying it's time for the president to unveil some leadership on entitlement reforms and spending cuts because he hasn't done it. i want to ask you at the president's pep rally today, did you hear any of those leadership reforms on spending and entitlements? >> i certainly didn't and, by the way, good evening, larry, it's nice to be with you again. i don't find myself often agreeing with the editorial page of "the washington post" but this time they had it right. the president right now, the pep rally today is going out again on friday is really a continue ways of the campaign when in fact right now what he ought to be doing is trying to find some common ground with republicans, with congress up here on capitol

hill because we've got to do something to avert this fiscal cliff. the only way we do that obviously is to come up with a package that addresses what really drives federal spending and that's entitlement programs. the president doesn't seem to want to talk about that, nor do democrats up here on capitol hill but we're not going to get a solution here at the end of the year that addresses the near term and long-term problem of this country unless we can deal with entitlements. >> it's a democratic senate. the president referred to a democratic bill in the senate. that bill would extend the tax cut under $250,000 and allow the top rates to rise. he didn't explicitly say top rates because bu that's what that bill does. does mr. obama and the republicans have the votes to pass their bill? >> well, i think they of course will have them in the senate. i doubt they would have them in

the house of representatives. more importantly, larry, the president came out of the election, held a press conference, said his number one priority was jobs and growth. we would agree that jobs and growth should be the number one priority. the worst thing can you do if you're worried or interested in growing commit and creating jobs, you can't raise taxes on creating those jobs. almost a million small businesses would be faced with higher taxes. those same small businesses employ 25% of the workforce and you have a study out there that says it would cost the economy 700,000 jobs, reduce take-home pay by 2% and slow the economy by 1.3% it's a mistake to do that. >> i'm looking at the politics of it. i see saxby as a defector, i see

susan collins as a defector. dough do they have the vote? >> i assume they keep all 53 democrats on all that. there might be a couple running in 2014 that high a high view on this. 60 is a high threshold. there are republicans out there who are talking publicly about this issue and articulating their-on-position on the tax issue. even if they can get to 60 in the house and senate, they're not going to get there in the house. the house of representatives have made it clear tax rate increases are a nonstarter. >> it just seemed like mr. obama was dissing mr. boehner on the difference between cap rates and deductions. >> i guess my other point isser skin bowls, he comes out of a white house, businessman's meeting today, and said that

maybe baum will be flexible and it will only being 37%, 38%. is at that what they mean by common ground? >> i don't think that gets threw. i mean, speaker bainor, other republican leaders have laid out parameters of what republicans can't up to water. >> you only raise $68 billion next year. that's enough to fund the government for less than a week. this does not solve the problem. and you do it at the expense of economic growth, which ultimately should be the goal here. if we want to solve deficits and debt problems, get the economy growing and expanding again, that generates more revenue by

comparison. >> let me just ask you a final question. what in your judgment is a key common ground concession that you as a republican -- if you were in the leadership would make to move this ball down the road snp i lot of people get if the president called you and asked you for a concession, what would it be, sir? >> look, we met with a number of ceos today, all of this fixes and that for us, the tax rate increases would be a nonstarter, particularly for small businesses. >> if you carved that out, if

you carve them out of the tax hike, would that be acceptable to you? >> for me be probably not but it might gain some votes. we've got some of our members who i think might find something like that. it had to do will loopholes, exemptions, that's the kind of thing that if the president were redity come to the table with entitlement reform you might able to find some consensus around. i don't see with the current posture, no entitlement reform and weefr just going to let rates go up. i don't know how you find a deal with that that any republican or most republicans can support. >> thank you, sir. we appreciate your views very much. >> many thanks to senator john

thune. switching gear, would "lincoln" still raking in box office revenue? it is worth note line that these leadership could later to discuss than my friend presidential historian doris kearns goodwine. her book on lincoln, "team of rivals, which inspired rier i thought it was fabulous then. i might have to reread the whole thing. it's great to you have back on the show, let me just ask you. for me, a lay person, with this tree it may be sloppy but it can work. what's your takeaway? >> i think what you learn is you need leadership to set the goal,

to get that 13th amendment passed but then you need to use every means can you to make sure you reach that goal. it is messy, it is sloppy, it is confusing. you know,or offering assignments people, you're offering ambassadorships, you're giving pardons out but it's working. that's what democracy is. >> look how engaged lincoln was in that process, okay. first of all, he send seward to hire agents to go after lame ducks. lincoln had meetings with the democrats one-on-one, he had former ball, he had dinner parties, he'd have them over and slam his hand down on thes did des being. he was totally engaged, which i think is totally cool but i don't think president obama at least in recent years has done that kind of thing. maybe he'll do it this time around. he hasn't done that. he needs to watch lincoln. >> i think what you learn is you

have to appeal to the higher motives of the congressman, make them know they're there for a purpose. they became politicians hopefully for a reason. so finishing somehow, doing something about the fiscal cliff would be a good thing to remember the rest of their lives but at the same time you have tie peal to their selfish interests, making them feel special, giving them what they need, putting them on plush assignments. churchill said democracy is the worst form of othgovernment, ext all the others that have been tried. >> it was interesting to me, thaddeus stevens, radicalist reconstructionist republican, so by the end of the thing he takes lincoln's advice and he pulls back a wee bit, that shocks everybody and that gives the amendment people, the 13th amendment supporters a lot of good ammunition.

so you do sometimes, doris, have to pull back a little bit. you're not giving up all your principles. you're just kind of, heaven forbid, being political. >> heaven forbid, you're right. that is exactly right. thaddeus stevens believes having blacks vote, even perhaps intermarry, having all the privileges of life which republicans weren't ready for. the conservatives would have said we're not voting for this thing but he was willing to moderate his own debate stance in order to get past something he knew was critical to get passed. >> doris, i'm not comparing the fiscal cliff with the great moral issue of slavery, i'm not going to make that comparison but i want to say this -- if you wanted a bipartisan solution to our deficit problems, which are going to go on for a couple of years, why wouldn't president

obama think about -- -- he doesn't he think about putting some other in key spots? >> i wouldn't be surprised if he tries to do that. he tried to get judd greg in his cabinet at the beginning. and then he later said he couldn't make that ideological leap. let's see what happens in this coming second turn. my guess is he'll be more open to it. let's see if both parties are open to accept those invitations if they come. >> thank you, doris. honored to have you back. by the way, check out and read hefr book "team of rivals," i read it years ago and it is fantastic. up next, understood bt lo-- stu length debt rises to trillions of dollars. is a four-year degree even worth it anyway?

>> tomorrow, the fiscal cliff looms and washington reresponds. the rise above road trip continues. well, in that time there've been some good days. and some difficult ones. but, through it all, we've persevered, supporting some of the biggest ideas in modern history. like the transatlantic cable that connected continents. and the panama canal that made our world a smaller place. we supported the marshall plan that helped europe regain its strength. and pioneered the atm, so you can get cash when you want it. it's been our privilege to back ideas like these, and the leaders behind them. so why should our anniversary matter to you? because for 200 years, we've been helping people and their ideas move from ambition to achievement. and the next great idea could be yours.

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bp pleaded guilty in connection with the worst offshore only spill. >> is the student loan bubble about to pop? new data shows student loan delinquencies at a new high, no credit standard and a suspicion that bailout nation could once again be on the way. ron, just a couple of real quick numbers. 74% rise in student loans sense the beginning of the recession. $1 trillion now, 11% in serious delinquency, 9% in default and there's virtually no credit standards when these loans made. now, this cannot be sustained. >> it would be like saying you go a mercedes-benz dealership and get it for zero credit and take it off the lot. it makes no sense. the product they're getting is also diminished. we used to be able to say when you got a college education, you'd make $1 million over your lifetime. now that number is about

$300,000. you're getting a diminished product and having to pay more for it. tuition is skyrocketing. since the president took office four years ago, the amount that people had to pay for tuition has increased 25%. >> let me stop on that point. in other words, my view is that this increase in student loan, just willy nilly, now the government has taken offer that business from the banks, there's no credit standards and they're throwing loans at it. don't the colleges and universities know that? aren't they using that government subsidy in order to raise tuition costs? >> larry, they love it. that's their bread and butter. that's why they love what's going on right now. they can push out whatever products they want and there's no strings attached. you can get an education in whatever and can you have all this money. so students are like when they're 18 and don't know any better, okay, great, i'll go get

a sociology major, major in flower studies. when they graduate, what happens? they don't get a job in that field and they're on the hook for an average of about $30,000. >> i'm a guy who wants to see people go to college, whether it's four years, two years, that's sort of my philosophy. i'm not a guy who wants to see students coming out of school having already destroyed their own credit record. you default or miss a couple payments, they'll destroy their own credit rating before they started life. i don't think they know that. >> we're not becoming generation y, we're becoming generation why us? it really doesn't look all that great for us. going back to the problem, we've increased access. you can get a loan for whatever and when students graduate, what jobs are out there there? we have to get on top of it from

a public policy standpoint. you have to look at privatization. would a loan officer look at an 18-year-old and say, yeah, i think you sudden get $100,000 to major in whatever. i'm not saying somebody shouldn't go and have access to college, but i'm saying you have to make sure you have a specific interest. >> a little bit like housing. there's no credit standards. the government is throwing money at it. i'm worried the bailout nation is going to rear its ugly head again when it comes to student loans. >> we switch from student debt to national debt. wall street whip sawed over every new word coming out of washington but what should you do next? ♪ [ female announcer ] today, it's not just about who lives in the white house, it's about who lives in the yellow house, the green, and the apartment house, too. today we not only honor the oval office, but we honor the cubicle, and the home office as well.

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groupon ceo andrew mason has been under fire for a slumping stock price. wall street's concern over the company's growth prospects but mason remains confident. today mason said if he ever thought he was the wrong man for the job, he'd fire himself. groupon shares way down since their ipo a little more than a year ago. fire himself. very interesting. now, let's take a broader look at today's stock market. after falling 112 points in a session low, the dow finished up 107 points. nasdaq and s&p both positive on the day. now michael far to make sense it have.

you just got to hate this. it's worse than the european union stuff. you just have to hate this and i want to ask you -- >> i hate it but i'm not leddy to fire myself. >> in a serious way briefly, should investors get on the sidelines until this cliff thing is over? >> i wish i knew. i keep thinking back to 2011 when i thought we were getting to the debt ceiling, there was no way congress would wouldn't come up with come miz, no way they'd face their constituents after the u.s. debt was down graded and if that happened, i thought interest rates would go higher and stocks wouldn't respond well. so it certainly doesn't sound in washington right now that these guys are in any way conciliatory or reaching across the i'll. we just don't know. and that lack of information i think kikts tole volatility.

in a lot of people believe that somehow or other both case and difficult difficult ends. to beat the tax hike on dividends, costco, murphy oil, disney, ebay, del, oracle and sh washington bureau. what do you think? should people look up there before they why not take advantage of the lower tax rate. you'd hope they have something better to. >> but if it's cash they don't have an immediate use for. the special dividend makes a lot of sense. you get the horse to walk in the direction of the carrot. knock the stick. so the more you tax something, you don't get more of it.

>> that's the whole problem. >> it doesn't make sense. >> the the whole big picture of this thing. i think we pretty much know these investment and solid balance sheets, good cash flow, strong earnings and a little dividend never hurt. don't panic through times like this. when fear is there, it's when you should buying, not selling. there's money to be made and be careful and don't get cause up in this emotional fouz.

>>. >> i. >> 12 more seconds. >> 12 more seconds. give me secretary of defense stock. >> you know, i'm going to be a little opportunistic. chipotle. it's pulled way back. i think it's a hot stock. people like tacos. >> many thanks. guy gets it done. he's been around a while. knows what he's talking about. that's it for this evening's show, folks. thanks very much for watching. much more on the fiscal cliff as it unfolds.

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